It’s the end of 2006, the housing price correction is two months old, and already the experts are predicting the end. While the pricing run up was the greatest in history, the predicted downside, it seems, will be one of the shortest and least economically damaging housing downturns on record. This despite the fact that Robert Toll, CEO of luxury homebuilder Toll Brothers and one of the most respected figures in the industry, has stated publicly this is the worst housing market of the last forty years.
The soft landing scenario is wishful thinking, nothing more. It’s tantamount to saying you can pig out on chocolate cake every day for three months, then walk it all off in five minutes on the treadmill. Even better, once you get off the treadmill, you can start to pig out again, no harm, no consequences.

Unfortunately, life, the world and financials markets don’t work that way. There are consequences for bad behavior, and there has been an unprecedented amount of bad behavior in the housing market for the past three years. With banks rushing to lower their loan standards even further, buyers rushing into even riskier mortgages, and Johnny-come-lately owners pulling investment properties off the market to wait six months for the “inevitable” bounce, or even worse doubling down with more properties, bad behavior is still the norm.

The housing bust will not reach its climax until it wipes out the one article of faith that fueled it: the belief that housing prices always go up. Even now, with housing prices tumbling, this is a dominant belief. A mid-October 2006 survey, quoted in Barron’s, revealed that 30% of homeowner think there house will go up in value 10-15% next year; only 6% think it will decline in value.

Or as a 32-year old entrepreneur who entered the housing market six years ago and now owns thirty houses puts it: the smart money right now (Nov 06) is buying up homes at “bargain” prices because real estate investments always go up over time. At the risk of stating the obvious: this is not the smart money.

As of November 2006, there is nothing in the numbers in the housing market, absolutely nothing, that doesn’t point toward a major correction in the market. Despite grumbling to the contrary, there will be no soft landing in the housing market. In fact, it is more likely that by 2009 the United States will be mired in the worst recession since the Great Depression.

Historic Housing Prices

Historically, housing prices have a correlation to several factors, primarily inflation, wages, income, population and GDP. By any of these measures, there was no support for the housing price run up since 2002.

Let’s take inflation. From 1976 to 1996, the price of housing, as measured by the Home Pricing Index (HPI), out gained inflation by a yearly average of only 0.34%, which means that over time the growth in housing prices and inflation were essentially equal. (By the way, some studies have concluded this equality has held true for more than five hundred years.) This is the reason that, although prices usually rise, residential housing is usually not a good speculative investment.

The graph shows the relationship between inflation and housing prices. The line represents the percentage rise in housing minus the percentage rise in inflation every year since 1976. As you can see, the rise in housing since 1995 is by far the largest, measured in terms of inflation, in the last thirty years. (Note: the unsupported rise is the area above the line, not the height.) In fact, it is three times larger than the last big housing boom in the mid-1980s, which resulted in thousands of bankruptcies, a stock market crash and a recession.

There are two conclusions to draw from this data:

1. The traditional factors that affect housing prices didn’t matter on the way up, so they won’t matter on the way down. Anyone who analyzes this market based only on historical pricing trends is missing the boat.

2. The housing market will fall a lot farther than it did in the 1980s.

But how do we gauge the probably fall?

Reversion to the Mean

Think of a pendulum. What happens when you pull it all the way up to one side and then let it go? Does it go right back down to the bottom and stop? No, it continues to travel a roughly equal distance in the opposite direction.

The movement of a pendulum is an example of reversion to the mean. For every move in one direction, there is an equal move in the opposite direction. The result creates an historical mean, or average. With a pendulum, this average position is hanging straight down. With housing, the historical average is slightly above the rate of inflation.

Reversion to the mean is a fundamental rule of markets; even Warren Buffett uses it when he talks about undervalued assets. A market reversion to the mean does not predict a price falling back to past levels; it predicts that, over time, the rate of return on an investment will eventually settle back to its historic level.

Let’s look at a recent example: the internet stock bubble.

Everyone knows the average yearly return on the stock market is 9%; this is one of the most widely stated facts in money management. From 1996 to the high of 2000, the cumulative yearly return on the NASDAQ stock index was 195.5%. If the index then simply returned to normal, it would have returned to the historical average of 9% each year for the next three years.

But that is not what happened. From the high in 2000 to the low in 2002, the cumulative yearly return on the NASDAQ was -130.1%. The actual cumulative yearly return on the NASDAQ from1996-2002 was 195.5 - 130.1, or 65.4%, almost exactly 9% per year. In other words, the NASDAQ reverted to the mean.
So how far away is the historical mean of housing prices?

The Fall of Housing Prices

From 1997-2005, the housing market returned 48.82% more than the rate of inflation. When we subtract the historical mean of 0.34% a year, the market has had a larger than normal upside move of 45.82%.

This is not quite as bad as it seems…yet. Reversion to the mean does not call for a 45% price drop; it calls for a 45% drop below the rate of inflation. As I’ll discuss later, housing prices will most likely reach their lows within three years. A practical prediction for inflation is 4% per year in that period (it’s currently about 3.5%), so reversion to the mean forecasts a 33% decline in the price of housing over the next three years.

Thirty-three percent is the national average; it does not necessarily mean your house will drop by that percentage. A conservative estimate is that your home will drop back to its value on January 1, 2003. A more likely scenario is that it will drop back near its value on January 1, 2002.

At this point, some of you may be thinking: but housing prices can’t go down in a modern, industrialized country with strong demographics and a finite supply of land. If you think that is true, just look at Japan.

In the late 1980s, Japan experienced a stock market bubble (sound familiar?). Its stock market, the Nikkei, peaked in 1989, but the price of Japanese real estate continued to climb for another year. Then it too started to reverse direction.

In 2003, the Nikkei bottomed out at 7603, a drop of more than 80%. In October 2005, Japan’s Ministry of Land, Infrastructure and Transport reported that Tokyo property values rose for the first time in 14 years, gaining 0.5% between July 2004 and July 2005. Fourteen years of declining property values! The myth that real estate only appreciates will soon implode in our country.

How Did We Get Here?

In 1997, the United States housing market began to move up considerably faster than inflation and income. This happens; it’s called a housing boom. Often, there’s a reason. In this case, it was probably the remarkable amount of money being made in the stock market. Incomes weren’t going up, but wealth was, and lots of people borrowed against stock market profits to buy luxury goods like top-line Mercedes with vanity plates and expensive homes.

The stock market crash should have been the end of the boom. The housing bust that followed would have been painful, but not devastating. But that’s not what happened. As the country muddled through a recession and personal wealth plummeted, the price of housing started rocketing upward.

Starting in 2002, the United States housing market went from a boom to a bubble. There are five reasons why this occurred.

1. A new tax law. In the late 1990s, a new tax law eliminated taxes on homes sold at a profit of less than $250,000 ($500,000 for couples), as long as the owner had lived in the house two out of the last five years. Suddenly, selling a house became a lot more lucrative.

2. The stock market collapse. The stock market collapse struck fear into the heart of average investors. With bond yields at historic lows, real estate took center stage as seemingly the only reasonable alternative for investment.

3. Rock bottom interest rates. In response to 9/11 and the stock market collapse, the Fed rammed interest rates through the floor. Not only did this make savings accounts and bonds unattractive, it made mortgages extremely affordable.

4. Economic history. By this point, housing prices had been rising swiftly for four years. Even more importantly, housing prices haven’t declined nationwide since the Depression. Therefore, they can never go down, right? Suddenly housing wasn’t a long-term asset; it seemed like a very safe and lucrative short-term investment.

5. Creative financing. Now everyone wanted in, but the price of housing was already too high for most people to afford. Along came creative financing—no down payment loans, ARMs, interest only loans, negative amortization loans, options ARMs (a truly evil financial instrument) and others. These loans offer low payments upfront, but come with rising payments as far as the eye can see. Since 2002, they have been used almost exclusively to get people into houses they can’t otherwise afford.

The first four factors are minor, except that together they led to the fifth factor. Irresponsible, or “creative,” financing causes bubbles. It pushes prices far beyond the actual ability of a society, and the individuals within that society, to afford them. When the creative financing ends, the prices are unsustainable and collapse.

If you’ve been paying any attention to the news at all, you’re heard this all before, so let’s skip straight to a few facts and statistics:

32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000;

43% of first time home buyers in 2005 put no money down;

40% of houses bought in 2005 were either investment properties or second homes, up from less than 10% two years earlier;

75% of buyers in California in 2005 took out so-called “liar loans” in which no proof income is required;

15.2% of 2005 buyers owe at least 10% more than their home is worth;

10% of all home owners with mortgages have no equity in their homes;

$2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007

Two stories illustrate the bubble very well. The first is about a lender, Washington Mutual. In 2003, 1% of WaMu’s borrowers’ final loan payment resulted in negative amortization, which means payments weren’t covering the interest and the balance of the loan was increasing. In 2004, that percentage jumped to 21%. In 2005, the percentage of all Washington Mutual borrowers whose last loan payment of the year resulted in negative amortization was 47%. By value of the loans, the percentage climbs to 55%, a clear indication that these loans are held by the middle and upper middle class.

These numbers are mostly the result of option ARMS, adjustable rate mortgages that give the borrower the option to pay less than the full payment due every month. The popularity of these loans, which were designed originally for the extremely wealthy, has exploded to more than 10% of all loans written, with the highest percentage offered to subprime lenders with bad credit.

Why would lenders make so many of these highly risky and speculative loans, even as the housing market deteriorates?

Because no matter what the borrower pays, the lender is able to book income as if they paid the full amount. So if a borrower pays only $500 on a $5000 mortgage payment, the lender just books it as $5000 in income. The “profits” may be phantom, but they are legal.

In January-March 2005, WaMu booked $25 million of negative amortization as income; in the same period for 2006 the number was $203 million, or more than 20% of earnings. That’s a large percentage for a national bank, but small potatoes in the lending industry. Some smaller regional banks have been receiving 90% or more of their income from these phantom profits. It came out recently that many lenders were paying mortgage brokers bonuses to push these mortgages, even though they are the most dangerous and speculative home loans ever devised.

The second story is about a borrower. He was in his late 20s, made $30,000 a year, had $20,000 in credit card debt, and was able to accumulate eight homes and well over a million dollars in outstanding mortgages. He received mortgages for more than the purchase price off the home, then used the extra money to live off. The lenders claim they were duped by false income statements, but where was the oversight? Remember, 75% of Californian mortgages in 2005 were “liar loans.”

The Other Side of the Housing Bubble

Contrary to popular conception, economic bubbles don’t pop in a day. Did the NASDAQ decrease 90% in a day? Was it a still a bubble?

There will be no sudden drop of 30-50% in the price of housing, and the lack of such a drop does not mean a bubble did not occur (as BusinessWeek laughably asserted a few weeks ago). Let’s not be coy: a sudden drop of 50% in housing prices would be the most devastating economic event in American history; it would send the country into an immediate severe recession with a Depression likely to follow.

A bubble decline, especially for an illiquid asset like housing, is a process. Prices flatten, then begin dropping over a period of years. Only at the end do they collapse. The problem is that the point of no return occurs early on, while prices are still going up.

The point of no return in the housing bubble occurred when the large number of people who can’t afford their loans lost the ability to refinance those loans at affordable rates. This moment probably occurred in summer 2005 when the Fed pushed the short term interest rate above 4%. This action guaranteed the short-term adjustable mortgage rate would rise far above its historically low level of 2-3% (it is now more than 6%), cutting off both new buyers and refinancers from the easy money that fueled the bubble.

Low rates opened the door for millions of unqualified or underfunded buyers to rush in. Rising interest rates closed the door, trapping buyers on the inside with no hope of escape. They are almost all doomed; they just don’t know it yet.
The end of the bubble occurred in December 2005, when inventories of unsold houses reached their highest level since 1986 and prices stopped going up. Here’s how the housing bubble bursts:

Housing prices stay flat as inventories rise to record levels month after month. Buyers who don’t realize the market has turned keep the market afloat…barely.

The smartest speculators, mainly crafty builders and professionals who were in the market before 2001, start to bail out. Prices dip. Buyers sense a buyer’s market and many jump in (especially new speculators) thinking they are getting a deal. They buoy the market temporarily, but they are the last ones onto a sinking ship.

Owners realize prices aren’t bouncing back. Mortgage payments are racking up. Houses and condos that were being held off the market go up for sale, flooding an already soggy market. Buyers disappear.

By this point, a majority of the creative loans are adjusting. Many home owners were banking on selling their homes for a profit before the higher payments kick in, but now they can’t get out for anything close to what they paid and refinancing rates are terrible. The financially weak are forced into foreclosure; the rest hang on for now.

Banks don’t want to become real estate investors, so they dump foreclosed houses on the market. The market heads straight down in a final death swoon. The last set of owners who bought during the height of the boom are either forced out of their homes or forced to bite the financial bullet, yoked to a financial albatross for the next 15 to 30 years.

Because of the nature of housing and the nature of this bubble, the unfortunate reality is that the decline will happen sooner rather than later. Most likely, we will reach the final step by late 2008 (as of November 2006 we are on step 2). Here’s why:

1. Psychology. We recently experienced a stock market bubble. Investors bought the first bounce, then saw the next turndown signal the end. They won’t make that mistake again; if the bounce is weak, investors will flee.

2. Carrying cost. Unlike stock, which is free to hold, houses are expensive to hold. Interest payments, insurance, property taxes, energy and upkeep cost hundreds even thousands of dollars every month. In a down market, few people are going to pay those expenses for long. Many are already trying to cover costs by renting out their properties; this strategy is only delaying the inevitable. They will sell when the lease is up at the end of a year.

3. Illiquidity. Unlike a stock, you can’t just sell a house any day you want. The wait is currently 6-8 months because nobody is dropping prices…yet. In a down market, sellers who price at today’s price may find their house is worth $10,000 less before they even get a looker. On the way up, sellers leapfrogged asking prices higher in anticipation of rising prices. On the way down, sellers will undercut each other’s prices, accelerating the market decline.

4. Mortgage adjustments. By the end of 2008, more than $2 trillion worth of mortgages will have adjusted to significantly higher, and in far too many cases unaffordable, rates. Forced selling is the final nail in the housing coffin.

Are you prepared for your house to drop 30% in value in the next three years? Now are you ready for the bad news? That decline still might be optimistic.

A Trader’s View of the Coming Catastrophe

I’m not an economist, which is good because economists are the worst people from which to take investing advice. I’m a market trader since 1976 who has spent the last thirty years studying the market. I’ve lived through four bubbles—oil and then gold, both in the 1970s, Japan in the late 1980s and the internet in the 1990s—and I’ve studied several others. They all have one thing in common: the actual bottom is far worse than anticipated, and it is far worse than fair market value.

The market is a shark; it is a very efficient predator that preys on the weak and the wounded. The weak are investors who use extensive leverage with insufficient knowledge. The wounded are those who overestimate their knowledge and become overextended. Right now, millions of home investors are thrashing around in an ocean of leverage; almost none of them will escape. The more leverage used to support the bubble, the more quickly the market will descend—and the farther it will decline.

If the market is a vacuum sucking everyone in on the way up, it is a pile driver slamming everyone into the ground on the way down. The market will continue to drive down past the point of reversion to the mean if that is what it takes to wring every last victim out of the market. In a down market, buyers will decide to rent for a year or two, forcing millions into foreclosure. Those who do buy will offer $20,000, $30,000 or even $40,000 less than the asking price. The offers will be accepted, because there is simply no other alternative.

Did you expect Yahoo to drop from a split-adjusted high of 118.75 to a split-adjusted low of 4.05? That’s a 96.6% decline—far more than the 63% decline of the stock market as a whole.

A similar phenomenon will occur in a housing bubble. The hotter your area on the upside, the colder it will get on the downside. The post-bubble burst will drive your house far below its actual non-bubble value. I’m talking quality houses, not just the ones that back up to a Burger King. Yahoo is a quality company, but it was in the wrong place at the wrong time. Now millions of homeowners are, too.

Are you ready for your house to drop 50% in value in the next couple of years? It may never get there, but you better make a contingency plan, because it’s well within the realm of possibility.

What about just waiting out the decline? Unfortunately, while prices go down quickly in a post-bubble environment, they don’t quickly bounce back, as looking at any of the bubbles of the modern era will prove.

1. Oil was trading for $32 a barrel in 1981; it reached a low of $12 a barrel in 1997—16 years after the top.

2. Gold was trading for $853 an ounce in 1980; it reached a low of $252 in 1999—19 years after the top.

3. The Japanese stock market hit 38,957 in 1989; it reached a low 7603 in 2003—14 years after the top.

4. The NASDAQ hit 5049 in 2000; it is currently trading at below 2500, and it’s not going to see 5000 again any time soon.

It is entirely possible that, because of depreciation as a house gets older, some houses will never again reach the prices they sold at in late 2005.

When Housing Goes, So Goes the Economy

The collapse in housing prices will have a devastating affect on the economy for one very important reason: a fall in housing prices will have a devastating affect on the American consumer. The American consumer (you) has kept the economy afloat for the last few years. Here are five reasons spending habits will change as soon as the housing bust begins to take hold.

1. Job losses. Housing is a boom-bust industry that hires and fires quickly. 40% of new jobs created since 2002 are in housing; a record 9.8% of American workers are now employed in the real estate industry. Experts predict at least 800,000 jobs losses in a decline.

2. Loss of ability to borrow. In 1989, the savings rate in America was almost 10%; now it is just higher than negative 1%. 90% of new debt since 2000 is mortgages and home equity loans. We have extracted gains out of our homes and spent the money to boost the economy. When prices flatten, there will be no more gains to extract and no more debt sources to tap.

3. Rising fixed costs. The American consumer has shrugged off higher energy prices, higher property taxes and higher health care costs. She will not be able to shrug off the additional $5,000-$15,000 per year to service her mortgage. Two trillion dollars in mortgages reset to higher rates by the end of 2007. Reason #2 cuts off the flow of money; #3 is the bills coming due.

4. Foreclosures and bankruptcy. 10% of home owners currently have no equity in their house; 5% already owe more than their house is worth—and that was as of April 2006, before prices started dropping! 15.2% of 2005 home buyers and refinancers owe 10% more than their house is worth. Estimates say a housing market that rises only 4% will cause $110 billion in mortgage foreclosures. Imagine the number in a market decline.

5. Plummeting consumer confidence. Here’s the American dream: you grow up, get a job, buy a house. Once you have the house, your future is secure. If their house isn’t a safe investment, the future for most Americans will look bleak. Declining housing prices will have the most devastating psychological affect on the American consumer since the Great Depression.

Don’t look at the internet bubble, and the shallow recession that followed, as a silver lining. The real estate industry employs 10 times more people than the internet companies and is a far larger piece of the American economy. At most, 20% of Americans bought into internet stocks; 70% of Americans now own a home. Investors were not leveraged in the stock market like they are in housing, and stock earnings—no matter how many people dreamed of instant millions—were never the bedrock of family finances.

Plus, there will be no third bubble coming to save the economy. The recession of 2001-2003 was shallow because the housing bubble pulled the country, and the American consumer, out of the doldrums. Whether Greenspan intended this or not, he acknowledged the fact when he stated that “equity extraction” from rising house prices—meaning home equity loans—was driving the economy.

Unfortunately, we didn’t escape forever the downside of the internet bubble. Like Japan in the late 1980s, we simply sandwiched a stock bubble and a housing bubble together, making for a doubly bad recession when the irrational exuberance ends.

A Reason for Optimism?

I’ve been a market professional for a long time. I’ve been bearish on the market before, but I’ve never seen a more perfect storm of destruction than has been built into this market. The coming decline is the biggest market event of my professional life, and it will cause a lot of suffering. I wouldn’t be writing this piece if I felt there was any reasonable chance of avoiding it.
Disaster may be averted, at least temporarily, by a return to the home buying spree of the last few years. Right now, unsold housing inventories are falling slightly, but are still way above healthy levels. My biggest concern is hidden inventory: primarily sellers who have pulled houses off the market in hopes of a bounce in the spring. Anecdotal evidence (talking with real estate brokers, direct observation, newspaper stories and friends and clients who have taken this approach) makes me worried this number is very high. I also worry about novice investors who are using this “soft period” to purchase more houses. If the market keeps falling, all those houses will come back for sale very quickly.

Of course, the market will be the final arbiter of price, not commonsense. Right now, the stock market tells us the housing decline is meaningless. Consumers continue to spend—and to be optimistic the bust will not affect them personally. Being a true housing bear now means bucking the trend, but some trends are meant to be bucked.

Smart Investing for 2007 and Beyond

An 18-year bull market ended in 2000, but not before leaving behind the belief in a new “can’t miss” formula—a mix of blue chip stocks, growth stocks, international stocks and bonds tailored to your personal risk preference. No matter how badly your investments are performing, this theory says, just wait it out. They will bounce back.

But the market right now is riskier than it has ever been for this type of investing. While the upside is limited, the downside for a traditional portfolio is enormous; this approach cannot and will not save your portfolio from a 40-50% decline if the housing market crumbles, and the bounce back will be long and slow. For the first time, I can honesty say that if you invest your money in traditional large mutual funds you could see your financial security destroyed.

Clearly, very few people can sustain a simultaneous loss of 20% in both their stock portfolio and their house. This is especially true of retirees, who will not have time to make up for the losses. Young people who bought houses at the top will either forfeit their homes, and everything they’ve worked for up to this point, or be crippled by a bad investment for most of their prime earning years. The pain will be magnified, possibly to the point of financial ruin, by losses in their investment portfolios.
If you want to survive the coming recession financially secure, you need to take a new approach to investing. Here is what you need to start doing today.

Home Owners. If you own a house, calculate your mortgage payments and expenses for the next five years. If your mortgage is adjustable, use at least a 2% rate adjustment per period. With that number in mind:

If you have investment property, do not hold it. Sell now.
If you have a second home, think about whether you want to pay the calculated costs if the property drops 30% in value. If you don’t, sell now.
If you can’t afford the calculated costs of your primary residence at your current economic level, refinance into a fixed rate loan. If you can’t afford the fixed rates, sell now. Otherwise, you’ll be praying for a miracle.
If you can afford the costs, assess honestly how you will feel if the value of your home is down 30%. If you can live with the numbers, don’t second guess your decision to stay, no matter how bad the market gets. Our recommendation, if you are in this situation, is to keep the house. A house is not an investment; it is a fundamental part of your life. If you enjoy where you live, there is no reason to leave.

Renters. Do not buy a home when prices dip 10%. You will be rushing into a bad investment. It is much better to buy six months after the bottom than six months before it. The last six months of housing price declines will be the most severe; in fact, the last six months will probably see more than half the total decline. Rushing in to buy a house early will take the greatest financial opportunity of your life and turn it into a loss.

Investors. Straightening out your housing situation isn’t enough. You also need to diversify your investment portfolio. Do not go to a mutual fund or financial planner for the standard asset allocation; almost all stocks—growth, blue chip and otherwise—will fall in a severe recession.

To financially survive the coming recession, you must have less than 25% of your portfolio in stocks. The more money you have in housing, the less you should have in stocks since the two will move together.

Here are some asset allocation tips:

Get out of REITs. They are extremely overpriced.

Do not look overseas. Not only are economies linked in the global market, but many countries in Europe and Asia are experiencing their own housing bubbles. If you feel compelled to go overseas, consider Japan. Japan should outperform the U.S. market by 15-20% over the next few years. Of course, if the U.S. market is down 40%, those aren’t good returns.

Gold is a long-term buy at $550 or lower, but expect a bumpy, volatile ride.

Get out of cyclicals, such as United States automakers. Large manufacturers have long been a favorite of conservative investors, but they will suffer in a recession.

Treasury bills and CDs are a safe investment. The returns are not high, but they will protect your money in a market downturn.

I highly recommend them for conservative investors.

If you want to profit from the decline, or if you want to hedge an existing position in stocks, you need to invest in a program or fund that shorts the market. These programs sell index funds or stocks without owning them, hoping to buy them back cheaper in the future. They profit from market declines.

Your best bets are market timers and asset allocation programs run by managers who have been investing with their trading style for at least five years because these investments can make money in both up and down markets. I’ve been timing the market for almost thirty years, and I’ve traded three steep market declines (1987, 1989, 2001), so I know how volatile markets can get. Market declines are perilous environments; they are not for the inexperienced.

Make sure you take the time to understand the investment philosophy, market outlook and risk factors of all your investments. Not all non-traditional investments will protect you in a down market. If you are willing to take the risk, the right program or fund can be very rewarding, especially in a recessionary period, but do your homework before investing.

The portfolio percentage you put in non-traditional investments is up to you, but here’s a good rule of thumb: determine the percentage chance you think housing prices have of falling 10% over the next two years. Invest that percentage of your portfolio in a non-traditional investment.

I’m 61 years old, and I am part of the first generation in American history to not experience a severe recession in their lifetime. The worst I have experienced is the bear market and stagflation of the 1970s. The coming recession has a chance of being as bad as any in American history.

There is still time to ensure your long-term economic health, but time is running out. The time to act is now.

Lon Witter has been an investment manager for more than thirty years, both in S&P futures and most recently in equities. His articles on the housing market have appeared in Barron’s and Futures magazine. Lon is a founding partner at Witter & Westlake Investments in Louisville, Kentucky. His flagship program, The Opportunity Program, has a 19.12% average yearly return since inception in 2002. Contact him at lon@witterwestlake.com.

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